That attractive fixed rate mortgage loan might look like a fantastic deal, especially in the wake of ultra-low interest rates, but beware the bait and switch.
Industry experts are more or less falling over each other in their zeal for warning prospective home buyers to not take a fixed rate loan with a fantastically low headline rate, especially since they more often than not carry more than just a few hidden costs. If you don’t believe me, well I’ve got news for you: there are enough two year fixes currently on the market available for headline rates of under two per cent to send most home buyers into paroxysms of joy, but only until you read the hidden fees attached to all these ‘excellent’ deals.
Whether it be a booking fee or an arrangement fee, it’s still going to cost a bundle, and these under two per cent interest rates lurk fees anywhere from £1,000 to £2,000. If you’re looking to not have to shell out a thousand or so quid on top of what could already be a rather weighty deposit, you’re going to have to realise that your only choice is to apply for a loan that simply carries a higher interest rate; this is the game that banks and other lenders play when it comes to making you jump through hoops until you find the best mortgage for you.
Sure, it looks great on paper for a bank or a building society to brag about how they have such ‘affordable’ home loans available to its customers, it’s really just smoke and mirrors. For young contractors attempting to buy their first home, mortgages are only affordable when they can secure a two year fix rate with only five per cent down as a deposit and having to spend less than £500 in arrangement or booking fees.
It’s so hard to put away money today for a deposit, what with the rampantly increasing cost of living and the number of banks willing to offer you a rate of return on your savings product being able to be counted on one hand. The last thing borrowers want to hear now are banks patting themselves on the backs for making home lending ‘more affordable’ yet ratcheting up the fees by hundreds and hundreds of pounds.
An independent mortgage adviser can see through the smoke and mirrors and read between the small print. There’s an awful lot to choosing the right mortgage. It’s not as simple as selecting the cheapest fixed or tracker rate mortgage you can find! Mortgage brokers have to be qualified to give you mortgage advice – a lot of call centre and branch staff aren’t qualified to give advice. An independent mortgage broker will research the “whole of market” to source best mortgage deal based on your circumstances. They aren’t on the lender’s side, they’re on yours!
John Yerou is the owner and founder of Contractor Mortgages®; a trading style & trade mark of the award winning Mortgage Quest Ltd. One of the most recognised names in providing mortgages for contractors and freelancers across the UK.
In 2004 John began his career in Financial Services as an independent mortgage adviser and broker. John has been instrumental in negotiating bespoke underwriting for contractors with high street lenders.
His presence in the industry as a go-to expert is growing by the day and he is regularly cited and writes in publications both locally and nationally.